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Friday, June 15, 2012

Trinamool Congress and West Bengal Chief Minister Mamata Banerjee, who called the shots on Wednesday in the presidential nomination issue, appeared isolated on Thursday.

After meeting Samajwadi Party chief Mulayam Singh Yadav in the evening, she emerged alone to announce that their candidate was the former President, A.P.J. Abdul Kalam.

But Mr. Yadav chose not to address the press.

The BJP, on its part, just said Mr. Kalam was “a respected leader and we take pride in him.”

SP sources, on the other hand, indicated that they had no objection to Mr. Mukherjee's candidature — the party just wanted to be treated better. On its wish list were an economic package for Uttar Pradesh, where it is in power, and an end to the pending cases against Mr. Yadav — and perhaps a shot at the Vice-President's job for someone from the party.

Indeed, through the day, Congress managers worked the backchannels to break the Banerjee-Yadav combine. Party sources expressed confidence that they would succeed in their mission.

Police in India have arrested a woman athlete on allegations of "rape"' and charges that she is actually "male".

Pinki Pramanik was arrested in West Bengal state after a complaint from her live-in partner, also a woman.

Police say they have requested a local court's permission to carry out a gender test on the runner.

Ms Pramanik has denied the charges and accused her partner of falsehoods. She has also refused to take a medical test to prove her gender.

"I have undergone numerous tests in my career as an athlete. Why should I agree to more ridiculous tests?" The Times of India quoted her as saying.

Ms Pramanik had won gold in the 4x400m relay in the 2006 Doha Asiad and a silver in the same event at the 2006 Melbourne Commonwealth Games.

She also won three gold medals in the 2006 SAF Games in Colombo when she won the 400m, 800m and 4x400m relay events.

She was arrested on Thursday and appeared in court.

"The complaint stated that the woman athlete was a male and has been cohabiting with her for the past several months with a promise to marry her, but later denied," Press Trust of India quoted a senior police officer in the Baguihati area of Calcutta city as saying.

The Athletics Federation of India said they would wait for the medical report and police investigation before taking any action.

While this was not billed as a campaign comeback or relaunch, the White House did suggest it was the argument that would frame the race until election day.

It perhaps did that, but in the desire to be comprehensive it felt more like an assembly of chunks of raw speaking notes. It was not something that would fire 'em up in the bleachers (stands, for our British readers).

At about one-quarter of the length of Mr Obama's remarks, Mr Romney's speech was effectively his now-familiar stump speech, again setting out his main arguments against the president.

He said President Obama's prescription over the last four years had been stimulus, so-called "Obamacare" and clean energy. All had failed.

Sober speeches like these don't make for vibrant viewing. Both will look okay once they are reduced to 20-second TV soundbites.

The path to higher growth lies in promoting manufacturing through transparent governance and better infrastructure, not in increasing foreign investment in retail trade, insurance and other service sectors

Slowdown in the growth of gross domestic product (GDP), a virtual stagnation in industrial production and the risk of losing investment grade rating by international rating agencies like Standard and Poor's has rattled the government, industry and policymakers. The dominant view — as expressed by influential members of the government and other policymakers — favours the introduction of major liberalisation policies aimed at facilitating the entry of foreign direct investment (FDI) in service sectors like retail trade, insurance, legal and other services as a means of reversing the slowdown. In my opinion, such an approach is flawed. Sustained growth is not possible without a healthy and growing manufacturing sector; attracting FDI in the services sector would at best play only a minor role. Indeed, India's overdependence on the service sector and the neglect of its manufacturing sector is partly responsible for the deceleration in growth. Results from most research studies show that for India, the service sector cannot be the engine for a sustained growth of income and employment. Like China, India should also concentrate on the manufacturing sector, for, in the long run, the growth of the service sector would also depend on the manufacturing base.

Real constraints

Research studies, by and large, zero in on two sets of constraints that stand in the way of the development of Indian manufacturing sector: physical and government infrastructure. These two are, in a way, related and could reinforce each other. In the last few years, India has not invested sufficiently in physical infrastructure like electricity, roads, ports and railways. This has resulted in huge shortages in electricity supply relative to demand, leading to long hours of load shedding, power holidays and even closure of several manufacturing units. Some of the large enterprises have opted for captive electricity generating plants, resulting in high costs and making their products globally non-competitive. Small and medium enterprises cannot afford captive power units and they are the main victims of power shortage.

Likewise investments in roads and railways have been inadequate, hampering the development of the manufacturing sector by increasing the cost of transportation. The presence of corruption and bad governance has made the situation worse. It is common knowledge that only a fraction of the investments on roads and other infrastructure projects actually reach the targeted projects as the leakages are large. This leads to the second set of constraints for manufacturing growth, namely, governance infrastructure.

Numerous studies show a strong relationship between good (corruption free) governance and investment climate. In the current globalised investment and trade regime, the same set of variables influences both foreign and domestic investment. At present, faced with 0.1 per cent growth rate in the industrial sector, the government is planning to offer interest rate and fiscal incentives to reduce costs and stimulate investment. In this context, it is important to note that corruption is also like a tax that pushes up the costs — the only difference being the sums collected through bribes do not go to the government but to private individuals. Thus, given the high levels of corruption, merely reducing interest rates might not be effective in making Indian enterprises more competitive.

High levels of corruption, in addition to pushing up costs, also adversely affect the quality of investment. It is now fairly well established that corrupt countries mainly receive investments from other corrupt countries, which does not result in technology transfer leading to global competitiveness. Thus, bad governance affects both the quantity and quality of investment. Moreover, even medium sized Indian enterprises are now investing in other countries and import products from their foreign units into India. Last year, the FDI outflow from India was more than 60 per cent of the FDI inflow into India. Newspaper reports indicate that this year FDI outflows from India could be equal to or even exceed FDI inflows into India. Indian enterprises find it difficult to do business in the current Indian environment and prefer to set up units in other countries and import the products into India. Furthermore, while the manufacturing sector dominates Indian investments abroad, foreign investments in India are mainly in the service sector, construction activities and real estate. This alarming situation cannot be reversed without major reforms that target good governance and removal of corruption.

Scams and reforms

In the last few years, major scams have broken out in resources sectors that are mainly owned by the government — like real estate, mining and ores, and spectrum.

Quite a lot of individuals who have obtained government permission to enter and exploit these resource sectors have amassed billions of rupees. In other words, under the existing business environment, the path to amass wealth is not through manufacturing but through exploitation of resources under government ownership. This needs to change. It is alleged that as a result of these scams, decision-making in the government has come to a standstill as bureaucrats are afraid to take decisions. It is strange that officials have been vested with many discretionary powers which they now rightly refuse to exercise. Corruption mainly takes place where important discretionary powers are vested with the decision maker and where rules are not clear-cut and decision making is not transparent. The way out of the mess is to reform the decision-making process by making it transparent and rule-based and by drastically reducing the discretionary powers of officials. So far, despite brave declarations of intent, no serious attempt has been made in this direction of administrative reforms.

In addition to administrative reforms, the government should also introduce rules and laws to drastically discourage cash transactions and cash holdings. Corruption cannot be reduced so long as cash transactions dominate. Newspapers frequently report police and income tax raids and the discovery of huge amounts of cash kept at home, offices and lockers. Subsequently, in many instances, the cases are dropped as the individuals succeed in explaining the source of their cash holdings. In this context, it is vital to introduce laws that discourage cash transactions. Drastic situations need drastic remedies. To discourage cash transactions, the government could place a limit on cash transactions. For example the government could declare that any transaction, say, above Rs. 5000 should be a bank or credit card transaction and not a cash transaction. This will bring huge expenditures on items like consumer durables, hotels and resorts under bank transactions and increase accountability. Likewise, the government could place a limit to cash holdings at homes, offices and lockers. The limit could be as low as one or two lakh rupees.

To conclude, a high growth rate for the Indian economy cannot be sustained without a vibrant and growing manufacturing sector. A policy aimed at GDP growth based mainly on attracting investment in the services sector will not succeed. Moreover, a thriving manufacturing sector is vital for employment generation. Under these circumstances, reforms should be aimed at good governance, transparent and time bound decision-making, reduction of currency transactions and holdings, and the rule of law.

(The author is Honorary Professor of Economics, Madras School of Economics. nssiddharthan@gmail.com)

Monday, June 11, 2012

The CPI(M) today said it will take a decision “politically” on the Presidential candidate after consulting other non-Congress secular parties once the UPA announces its choice for the top post.

The Left party made it clear that it was not bound to support the ruling coalition candidate.

“We are not bound, we are not part of the alliance of the Congress and the UPA that we have to support anybody they propose,” CPI(M) general secretary Prakash Karat told reporters.

Asked whether the party will support a Bengali, in an apparent reference to Pranab Mukherjee, who is the front runner for the candidature, Mr. Karat said, “I thought we are an all India party...politically we will take a decision after the name comes.”

He said the Left parties will meet and consult non-Congress secular parties and then will take a decision, Mr. Karat said.

The Presidential polls, slated in July, was discussed in the two-day party Central Committee meeting, which ended yesterday, and it authorised the Polit Bureau to formulate party’s strategy on the elections after discussing with other Left and like-minded secular parties.

When pointed out that the CPI(M) supported UPA candidate Pratibha Patil last time, Mr. Karat said it was a different situation then as the party was supporting the UPA government from outside.

“It is not a question of being in favour last time. Last time it was a different situation...(Now) it is for the Congress to decide on who will contest,” he said, adding the Left parties have decided that the UPA should come out with their proposal first.

“We don’t know who is going to be proposed. We can’t go by all the speculation. Did anyone expect that Pratibha Patil was going to be the President? Let the Congress party tell us. Why should we waste time discussing speculation,” he said.

The CPI(M) and other Left parties have so far refused to spell out their preference and have been asking the UPA government to come up with a candidate having “widest possible acceptance” for the Presidential elections.

While Mr. Mukherjee appears to be the front runner, the sources said some sections in the party have reservation about supporting a Congress candidate for the post of President.

Left party leaders maintain that there should be a candidate for the Presidential election based on the “widest possible acceptance”.

Sunday, June 10, 2012

A top Chinese diplomat said the situation in Syria shouldn’t be on the agenda at the upcoming G-20 summit in Mexico because the meeting needs to stay focused on global economic issues, including the European debt crisis.

Vice-Foreign Minister Cui Tiankai told reporters at a briefing on Monday that although there is intense global concern over the situation in Syria, the summit isn’t the appropriate place to discuss it. He said political and security issues have not been on the G-20 agenda before and shouldn’t be now.

Mr. Cui said Beijing will press the interests of developing countries but acknowledged American and European financial problems inevitably dominate discussions at G-20 meetings because of the size and influence of their economies.

Elections in Libya for a constituent assembly, originally set to be held by June 19, are to be postponed for logistical reasons, said electoral commission members.

One member said the postponement until July or later had been decided mainly to allow time for appeals from candidates ruled out of the contest.

“Several dates have been proposed, but most discussions are pointing to July 10,” he said.

Another member said the postponement had been decided in consultation with U.N. officials working with the commission who had “proposed a date during the first week in July.”

“But if we are not ready by that date, the election will be postponed for the month of August also, until after Ramadan,” he cautioned.

Rumours have abounded in the Libyan capital that the constituent assembly election would be put off, despite the authorities insisting it would go ahead on time.

More than 2.7 million Libyans, or around 80 per cent of eligible voters, have registered to participate in what marks the first national poll after four decades of dictatorship under Muammar Qadhafi, toppled last year.

The ruling National Transitional Council, having declared the country's “liberation” three days after the October 20 capture and killing of Qadhafi, launched a roadmap to a new Libya with a 20-month countdown to elections.

A transitional government was to organise within eight months the election of a 200-member assembly, or “general national congress.” The NTC is to step down once the congress holds its first session.

Leftist candidates won strong support in the first round of France’s parliamentary elections on Sunday, according to polling agencies, in a vote that is crucial to President Francois Hollande’s Socialist agenda.

Based on Sunday’s first round, polling agencies predict that Socialists and other leftists will take a majority of the 577 seats in the National Assembly in the decisive second round on June 17.

Four polling agencies’ projections and early official results show diminished support for former President Nicolas Sarkozy’s conservative UMP party.

“It’s a good result tonight ... but we have to remain mobilised for the second round,” said Foreign Minister Laurent Fabius.

The CSA and TNS-Sofres polling agencies predicted that leftists would take between 300 and 366 seats in the next Parliament, and the conservatives between 210 and 270 seats.

Polling agencies CSA, TNS-Sofres, Ipsos and Ifop estimate that Socialists and their allies won between 31 per cent and 35 per cent of the nationwide vote, while UMP candidates and their allies won between 34 per cent and 35 per cent.

Candidates of Marine Le Pen’s far-right National Front party were projected to win between 13 per cent and 14 per cent of the vote in the first round.

Ms. Le Pen said she came in first in the northern district where she is seeking a seat, but faces a run-off against a Socialist candidate.

Candidates, who win more than 50 per cent in the first round, win the seat outright. Many races go to a second round, involving any candidate, who garners more than 12.5 per cent of the registered voters in the first round.

Mr. Sarkozy’s former Prime Minister, Francois Fillon, warned that Mr. Hollande might not get the powerful mandate he needs.

“There is a lot of concern about the first measures that were put in place” after Mr. Hollande’s election, Mr. Fillon said after Sunday’s results started coming in.